Multifamily Financing: Allocations Increased and Lenders are Eager to Deploy Capital in 2021

Bridge Financing

Multifamily remains one of the most appealing asset classes. Deals located in core-markets or strong growth secondary locations can expect interest rates in the low 300s over LIBOR range. Total coupons are hovering at all-time lows with leverage pushing into the 75%-80% of cost range. Despite an uptick in spreads above 2019 levels, floating rate indexes (LIBOR & SOFR) have significantly decreased resulting in interest rates at similar pre-pandemic levels. Additionally, Lenders are less concerned over hedging index volatility as floors continue to contract. While the most advantageous terms remain available for loans with proceeds in excess of $15-$20M, smaller bridge deals can fund with banks and private money funds with a pricing premium between 150-300bps.

Permanent Financing

Bank Lenders continue to quote rates for non-recourse perm debt on multifamily assets in the ultra-low range of 3.10%-3.50%; depending on the length of the fixed rate term; 5, 7 or 10 years. Banks are scrutinizing tenant credit profiles and rental collections during underwriting. Many Bank institutions continue to offer discounts on pricing when transferring considerable deposits. The CMBS market is off to a strong start this year. Expectations remain high for 2021 with total originations volume predicted at $107B compared to $60B over the prior year, a 78% increase YOY. AAA bonds have executed extremely well in the most recent conduit securitizations exhibiting an average of Swaps +62; the BANK 2021-BNK31 achieved a low of +61. These bond trades translate into excellent pricing with all in coupons in the low 3’s. The extremely sanitized pools of late 2020 are also relaxing and now including more impacted asset classes.